Forecasters Project Value-Driven Holiday Season

WASHINGTON Consumers will be looking for bargains this holiday season, and retailers are expected to accommodate them with a strong value message, according to forecasts released last week. The National Retail Federation projected that retailers would experience sales gains of about 2.3% during November and December, a slight improvement over the meager 0.4% gain they tallied in 2009. Though the retail

WASHINGTON — Consumers will be looking for bargains this holiday season, and retailers are expected to accommodate them with a strong value message, according to forecasts released last week.

The National Retail Federation projected that retailers would experience sales gains of about 2.3% during November and December, a slight improvement over the meager 0.4% gain they tallied in 2009.

“Though the retail industry is on stronger footing than last year, companies are closely watching key economic indicators like employment and consumer confidence before getting too optimistic that the recession is behind them,” said Matthew Shay, chief executive officer, NRF.

The NRF's forecast is based on several economic indicators and previous monthly retail sales reports.

“While consumers have shown they are once again willing to spend on what's important to them, they will be very conscientious about price,” said Jack Kleinhenz, NRF chief economist. “Retailers are expected to compensate for this fundamental shift in shopper mentality by offering significant promotions throughout the holiday season and emphasizing value throughout their marketing efforts.”

That jibes with a separate forecast published last week by Accenture, New York, which reported that 83% of consumers expect to spend the same or less this holiday season compared with 2009.

“The 2010 holiday shopping season will be spectacularly unspectacular for many consumers,” said Janet Hoffman, managing director of Accenture's retail practice.

According to Accenture's survey, 87% of respondents will not buy a specific gift unless they can get a discount of at least 20%, and 25% of respondents said they will expect a discount of 50% in order to make a purchase.

The survey indicated that consumers were not pleased with the level of discounts made available last year — 38% of respondents said it was the No. 1 area that retailers needed to improve upon this year.

Accenture said it expected overall holiday-season sales to be flat compared with year-ago levels.

Of the 83% of shoppers who said they will spend the same or less on their holiday shopping, 53% claimed it was because they have less discretionary income this year. The majority — 60% — said they plan to reduce their spending by $100 or less this year.

About two-thirds of consumers — 65% — plan to spend at least $250 on their holiday shopping in the 2010 season, up slightly from 2009, when 62% said they would spend at least that much. Interestingly, fewer consumers — 53% — will set a budget for holiday spending this year, compared with 63% in 2009, Accenture reported.

Nielsen Co., New York, also projected flat spending this holiday season, with dollar sales about even with last year and unit sales down slightly as consumers overall will make fewer shopping trips.

According to Nielsen's survey of 25,000 households last month, 48% said they expect spending to be about the same this holiday season, 36% said they expect to spend less and 5% said they expect to spend more. The rest were either undecided or do not participate in holiday spending.

The survey projected flat holiday spending in grocery stores, supercenters and club stores, slight declines in dollar stores and mass merchandisers/discounters, but relatively strong gains in online channels, especially among high-income consumers.

“Hot” gift items for the holiday season will include technology products and gift cards, Nielsen predicted — with “possible upside surprises” in some discretionary items, including toys, apparel, video games and books. Jewelry and DVDs could see a “slight uptick,” based on consumers' reported interest, Nielsen said.

“Retail channels offering a clear value proposition and those that focus on consumers' desire to plan as they manage personal finances will do well,” the Nielsen report concluded. “More and more, it's about capitalizing on the interactions with an increasingly savvy — and at times disloyal — consumer. Those value propositions tailored around benefits beyond price will resonate with consumers.”